Earlier this year a very important loop hole which had allowed foreign buyers to purchase real estate in Portugal tax efficiently was walled up!
Prior to this change of law it was possible for non-Portuguese purchasers to buy investment property in Portugal via an offshore company and save themselves thousands in tax.
In 2004 this window of opportunity was well and truly closed! There was a lot of concern in Portugal and among foreign investors that this would seriously damage the housing market in Portugal - particularly the second home housing market in regions such as the popular Algarve.
However, this does not appear to have been the case. The property market across Portugal is still strong and in particular, the market in the Algarve region is riding high with property prices still increasing significantly and demand still in line with supply.
So it does seem that those interested in buying a second home in the sun or looking for a property investment opportunity further a field are still turning their attention to Portugal.
So what is it about this country, and in particular, this region of the country that proves of continued attraction to both holiday makers and those looking for their dream home abroad?
It seems that a number of factors contribute to the Algarve’s popularity: -
Firstly the region is the most popular region in Portugal but its property prices are cheaper than those in the most popular regions of Spain and France.
Secondly, cheaper flights, increased media attention and the opening of the final section of the Via do Infante (A22/IP1) motorway has opened up the entire Algarve region to more holiday makers and more foreign property investors looking for the ideal opportunity. The motorway took twelve years to complete and has given great relief to residents and tourists as it provides a fast, toll and congestion free route across the entire region. It links Vila Real to St Antonio to Lagos.
The real estate market in Portugal has been solid and stable for the past 20 or so years and is continuing to offer a good medium to long term investment vehicle.
Also, the Algarve retains a slightly more exotic charm to it than Spain for example. It has suffered less over development and exploitation than Spain. Planners in Portugal have also been careful to protect the entire Algarve region from beach front development thus retaining the stunning coastlines’ appeal…building closer than 500 meters to a beach is actually prohibited and building above 4 stories is now almost impossible to achieve.
In terms of Portugal’s amenities and attractions - there’s everything from the 200kms of coastline, 3,000 hours of sunshine (which is more than Florida gets) low crime, absolutely no terrorism threat (unlike Spain or Florida for example), low pollution, a very straight forward and regulated property buying process, and all those golf courses!
Those interested in buying property in the Algarve are not only buying a solid long term investment, they are potentially buying themselves an income stream as well. Villas and apartments in the area are much sought after - especially during the long summer months - for holiday lets. So buying to let in Portugal, especially in the Algarve, is a real value added bonus opportunity for many.
Therefore, Portugal remains a firm favourite for property investors all round.
If you’re interested in learning a little about the buying process in Portugal an examination of it follows, but first I’d like to suggest the following resource from Amazon for your further reading: -
Dan Boothby
This title tells you all that is needed to know about the nitty gritty of buying property - raising finance, finding and dealing with estate agents, inspections and surveys, conveyancing, exchanging contracts, removals, and more.
It also provides information for when you have moved in, from how to deal with builders to making money by letting out your home.
This book on Portugal covers the entire country, not just those areas already popular with British buyers, explaining the character of the different areas and the types and price of property available.
Special features include full coverage of the up and coming areas for those who want to be amongst the first to discover the new Provence or Chiantishire.
Click here to order a copy directly from Amazon!
This will open a new browser window - if you have a pop up blocker you will need to hold down the control key and then click the link!
The Buying Process
With the tightening of regulations surrounding the use of offshore companies for property purchase most people will now be going the more traditional route: - Preliminary Contract followed by Final Deed and Completion.
If you are still interested in finding out whether you can benefit from the use of an offshore company it will be important to get the proper legal and financial advice relevant to your personal circumstances.
If you follow the traditional buying process the first stage will be the signing of the preliminary contract (usually a Contrato de Promessa de Compra e Venda) - both the purchaser and vendor sign this legally binding contract and a 10% - 30% deposit is usually handed over at this point.
This deposit is non-refundable if the buyer drops out - in fact, if the buyer drops out s/he may well be fined as well. If the vendor drops out the deposit will be repaid along with a penalty.
The preliminary contract will confirm the identity and right to sell of the purchaser and complete details of any surveys and searches carried out by the buyer’s legal representatives.
When it comes to legal representation, it is highly recommended that a purchaser employs a local lawyer to make sure any property is free of debts and restrictive clauses.
When the completion date is reached the final contract or ‘Final Deed’ (escritura de compra e venda) will be signed - again by both parties - in the presence of a notary (notary advogado). The notary will be responsible for checking all documentation has been correctly completed and submitted and that all taxes and fees have been paid.
Upon signing the Final Deed the remaining monies are then transferable to the vendor.
